Globalization and Its Discontents

In May 1979, Conservative party leader Margaret Thatcher was sworn into office as the first female Prime Minister of the United Kingdom. A little over a year later, in January 1981, Ronald Reagan, leader of the American Republican Party, took office in the White House in the United States. Both leaders are known for being anti-Keynesian, anti-big government, and pro-private business.

This stance is a radical break from the economic and political trends that had been building since the Great Depression of 1929, which encouraged greater social programs, higher taxes, and a larger government. Both the US president and the UK prime minister advocated for a political shift to the right: Reaganomics and Thatcherism, as they came to be called, focused on expanding the private sector and controlling inflation through tight budget balancing, at the cost of rising unemployment. Both strongly pushed the idea of “trickle-down economics”—a principle of economic distribution founded on the belief that any growth in the upper class will eventually flow down to positively affect the lower classes. Trickle-down economics is primarily used to justify tax cuts.

In Globalization and Its Discontents, Stiglitz highlights the Reagan-Thatcher revolution as one of the factors that pushed the IMF and other international economic institutions to adopt market fundamentalism as their primary ideology. Although these international institutions were first established under Keynesian principles, which argue that markets are imperfect and require some amount of government intervention, especially on the global scene as countries become more interdependent, since the 1980s, they have changed to reflect the exact opposite ideology. Reaganomics and Thatcherism were extremely popular in their time—although Stiglitz argues they caused more harm than good in retrospect—and they culminated in the IMF, the World Bank, and the US Treasury forming the Washington Consensus at the end of that same decade. All three institutions pushed for rapid liberalization and privatization overseas, with the IMF even making them preconditions to lending funds.

Stiglitz’s work strongly criticizes this push for market fundamentalism overseas. He argues that these impositions are ideological in nature rather than practical. They do not help to alleviate poverty or stabilize economies, which were the core reasons for establishing the World Bank and the IMF. Instead, they enrich elites in the financial world, leaving ordinary taxpayers of developing countries to shoulder the risks of the unregulated market. Stiglitz believes these counterproductive policies are at the root of Russia’s economic stagnation and the primary cause of the collapse of the Thai baht and the Asian financial economy in 1997. The main purpose of his book is to address the IMF and the World Bank’s mistakes, which have become increasingly transparent over the years.

Stiglitz argues that their reliance on a disproven economic principle has not only failed to maintain international economic stability but also turned globalization into a force that impoverishes the poor, lowers standards of living, increases unemployment rates, and widens wealth inequality between countries and within society. He proposes a return to Keynesian principles: International regulatory institutions like the IMF and the World Bank should acknowledge imperfections in the market and correct them. Most importantly, they should pay attention to indices such as unemployment rates, environmental degradation, and wealth distribution in order to better serve the interests of developing countries. Only then could globalization become a force for good and a means to achieve greater social justice.